Oregon freezes $60 million project in face of cost overrun

APRIL 23Oregon this month halted a $60 million retirement system project after costs more than doubled and an administrative review found an unacceptable risk of failure.

Jim Hill, chairman of the Oregon House Ways and Means Subcommittee on Electronic Government, pledged to block further funding for the Oregon Pension Administration System after holding hearings on the project's problems. The House General Government Budget Review Committee began its own OPAS hearings today.

Oregon's Public Employee Retirement System, a state agency with an 11-member board of directors, has been working on OPAS since 1997, board chairman Emile Holeman said. Other state pension agencies have expressed interest in the preparatory work on OPAS that the retirement board has carried out with contractor Covansys of Farmington Hills, Mich.

The Administrative Services Department's Information Resources Management Division recommended April 10 that work should stop on OPAS. The division called for the design of a new system to automate pension administration 'at an affordable cost and with acceptable risk,' according to a letter to the retirement agency from Oregon CIO Ann Terry.

Terry's letter followed a review of OPAS by the division's Strategic Planning and Review Section that led to an April 6 recommendation that OPAS undergo a redesign.

Sandra Herring, manager of strategic planning for the department, said OPAS' costs had been estimated at about $30 million when the project began. Since then, cost estimates have increased to between $60 million and $100 million, she said.

In her letter to the retirement agency's executive director, Jim Voytko, Terry said two insurmountable issues prevent OPAS' continued development: The project can't be divided into scaleable modules, and the agency's staffing levels 'are inadequate to manage the project.'

She added that the retirement board should develop a proposal for a new system that includes scalable modules, adequate staffing, independent quality assurance and a clear accountability structure.

Dawn Phillips, a spokeswoman for state legislator Hill, said the OPAS project had spun out of control because the retirement agency has 'added bells and whistles' that needlessly increased cost.

OPAS would replace a legacy system, the Retirement Information Management System. Holeman and other officials agreed that RIMS soon will be unable to handle the increasing pension workload.

'Rep. Hill is very concerned,' Phillips said. 'This started out as a $30 million project and now has ballooned into a $100 million project. We had a similar problem with a Motor Vehicles Department project a few years ago and don't want to go there again.'

Holeman said the retirement board plans to look at several options for overhauling OPAS. 'I think the price tag was a bit high for the people in the oversight roles in the executive and legislative branches,' he said.